Both Norfolk Southern Corp. and Morgan Stanley & Co. have moved to strengthen their attempts to buy Consolidated Rail Corp. from the federal government.
Norfolk Southern lawyers, accompanied by attorneys from two other railroads, met with representatives of the Justice Department's antitrust division late Monday to discuss a new proposal that Norfolk Southern hopes will resolve issues Justice has raised.
Meanwhile, nine new investors joined the group that Morgan Stanley has assembled to seek control of the freight railroad that serves the Northeast and Midwest. Both Norfolk Southern and Morgan Stanley have offered $1.2 billion for the federal government's 85 percent stake in Conrail.
Transportation Secretary Elizabeth Hanford Dole selected Norfolk Southern after an extended bidding process, but her selection requires both Justice Department approval and legislation from Congress. Morgan Stanley's group, which now has 41 investors, then entered the fray and stalled the Norfolk Southern bid on Capitol Hill.
There are many parallel miles of Conrail and Norfolk Southern track west of a line from Buffalo to Pittsburgh and the antitrust issues have been most strongly debated in those areas.
To alleviate those concerns, Norfolk Southern has offered to sell track or track-use rights to two small railroads, Guilford Transportation Industries and the Pittsburgh & Lake Erie. Representatives of those roads joined to support Norfolk Southern's new proposal at the meeting Monday.
Justice officials would not comment on the meeting or the new proposal, which it has under review. The Senate Judiciary Committee is planning hearings after Justice has concluded its study. Norfolk Southern Chairman Robert B. Claytor has said many times that if there is no substantial progress by the end of the year, Norfolk Southern will withdraw its offer. Substantial progress is understood to be Senate approval of the Norfolk Southern purchase.
In a related matter, The Washington Post has learned that effective Dec. 2, Conrail has hired Wayne A. Michel, an Interstate Commerce Commission employe who was a key player in the recent ICC staff report for a House committee. The report said that neither Guilford nor P&LE would be viable even after the proposed divestitures by Norfolk Southern/Conrail of track or track-use rights.
Michel said that Conrail contacted him about the job in mid-September, after the report was released, and that he immediately recused himself from all Conrail issues. Michel's supervisor, Louis E. Gitomer, chief of the ICC's rail section, confirmed that and said, "I don't see any conflict whatsoever."
Conrail said in a statement that "Mr. Michel's involvement in the Conrail sales study at the ICC was inconsequential . . . [he] was hired because he is the best person for the job."